* CSI300 falls to lowest level since Sept. 2020
* Tech shares lead losses, IT index down 2.46%
* Yuan heads for biggest one-day loss vs. Dollar in 7 weeks
* Stock Connect shows nearly 8 bn yuan in outflows
SHANGHAI, Jan 27 (Reuters) - Chinese shares slumped to nearly 16-month lows and the yuan fell against the dollar on Thursday as global investors worried that the U.S. Federal Reserve would move aggressively to curb inflation.
China's CSI 300 blue-chip share index fell as much as 1.64% in morning trade to touch its lowest level since Sept. 30, 2020, and the Shanghai Composite index fell as much as 1.47%. Both indexes later trimmed their losses, with the CSI300 down 0.99% at midday and the Shanghai Composite 0.88% lower.
Losses were led by tech shares, with an index tracking the computer sector down down 3.35% and the CSI Info Tech index down 2.60%. Energy shares were a rare standout, with the sector gaining 1.23% after global oil prices reached October 2014 highs.
In Hong Kong, the Hang Seng index tumbled 2.57% and the China Enterprises Index was 3.01% lower, set for its biggest daily percentage drop s ince Sept. 20.
The slump came amid a global pull back in equities after U.S. Federal Reserve Chairman Jerome Powell warned that inflation remains above the Fed's long-run goal and supply chain issues may be more persistent than previously thought.
"The recent performance of overseas markets is a factor weighing on the A-share markets," said Zhang Yangbing, an analyst at Zheshang Securities. "Moreover, investors are worried there may be more corrections in overseas markets when mainland markets are closed during the holiday."
Mainland Chinese markets will be shut for China's week-long Lunar New Year holiday, which starts Jan. 31.
Foreign investors were heavy sellers of Chinese shares on Thursday, with Refinitiv data showing outflows through the northbound leg of China's Stock Connect programme nearing 8 billion yuan.
Data from East Money Information showed outflows at the midday break were already the largest since July 26, 2021.
China's currency also weakened sharply, heading for its biggest one-day loss against the dollar in seven weeks as higher U.S. yields lifted the greenback .
"The key takeaway is that the rate hike cycle is about to start," Philip Wee, Senior FX Strategist at DBS Group wrote.
The market, which had turned neutral ahead of Fed meeting, is now bracing for a more aggressive frontloading of rate hikes, he added. Federal funds futures now price in as many as five rate hikes this year.
The yuan fell roughly 0.4% against the dollar, after the People's Bank of China set a sharply weaker midpoint rate at 6.3382 yuan per dollar, versus 6.3246 a day earlier. It was the biggest weakening in the the daily mid-rate fixed by the central bank since Dec. 20.
(Reporting by Andrew Galbraith, Samuel Shen and Jason Xue; Editing by Simon Cameron-Moore)
